What is Sky (SKY)?

Deep Dive

1. Purpose & Value Proposition

Sky Protocol emerged as a solution to MakerDAO’s governance scalability challenges, rebranding in 2024 to prioritize user control and ecosystem growth. It enables users to:
- Earn yields via Sky Savings Rate (4.5% APY as of August 2025) by depositing USDS.
- Access Sky Token Rewards (e.g., SKY, SPK) by staking USDS, fostering participation in governance and ecosystem projects.
- Upgrade legacy DAI and MKR tokens to USDS and SKY, respectively, to unlock new features.

The protocol’s non-custodial design ensures users retain full asset control, aligning with decentralized principles.

2. Technology & Architecture

Built on Ethereum, Sky integrates SkyLink to bridge Layer 2 networks (e.g., Base, Arbitrum), reducing gas fees and improving transaction speeds. Key components include:
- Staking Engine: Replaced MakerDAO’s "Seal Engine," allowing SKY holders to stake tokens, delegate votes, and borrow USDS without exit fees.
- Decentralized Governance: Governed via the Sky Atlas, a ruleset maintained by on-chain voting, with parameters like buybacks (1.12B SKY repurchased by August 2025) determined by token holders.

3. Tokenomics & Governance

• Supply Dynamics: SKY replaces MKR at a fixed rate, with penalties for delayed upgrades post-September 2025.
• Revenue Allocation: 50% of protocol income funds SKY buybacks and staking rewards, incentivizing long-term holding.
• Ecosystem Expansion: "Sky Stars" operate as semi-independent projects (e.g., Spark for lending, Grove for institutional credit), each with tailored tokens and governance.

Conclusion

Sky Protocol reimagines MakerDAO’s infrastructure with upgraded tokens, modular governance, and Layer 2 interoperability. How will its focus on institutional-grade DeFi products like Grove influence adoption amid growing competition in real-world asset tokenization?